Pensioners and self-funded retirees hit by drop in rates

THERE will be little Christmas cheer for pensioners, self-funded retirees and other older Australians living off their investments as the latest rate cut eats into their already reduced income, lobby groups for seniors say.

More than 1 million people who fall into this category, including those who depend on term deposits for income, could be losing an amount equivalent to 25 per cent of a person's wages after a series of rate cuts since November last year, according to the chief executive of National Seniors Australia, Michael O'Neill.

''Over the past 18 months, we've seen a reduction of about 1.75 per cent from about 6 per cent, so it's over 25 per cent reduction in the interest rate on offer,'' Mr O'Neill said. Greg Williams, a self-funded retiree from the south coast, said he and his wife would face an income cut of about $12,000 due to a lower rate on his term deposit. ''We're going to concentrate on essentials only, that's it,'' he said.

Pensions would stay at the same level in the short term so retirees might have to pay higher prices if lower rates led to an inflationary push, said the senior policy adviser of the Combined Pensioners and Superannuants Association, Amelia Christie.